Financial Interest and Syndication Rules

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The Financial Interest and Syndication Rules, widely known as fin-syn rules, were a set of rules imposed by the Federal Communications Commission of the U.S. in 1970. The FCC sought to prevent the Big Three television networks from monopolizing the broadcast landscape by preventing them from owning any of the programming they aired in primetime.[1] The rules also prohibited networks from airing syndicated programming they had a financial stake in. The rules changed the power relationships between networks and television producers, who often had to agree to exorbitant profit participation in order to have their shows aired. Some argue the rules brought about a golden era of independent television production by companies like MTM Enterprises (The Mary Tyler Moore Show) and Norman Lear's Tandem Productions (All in the Family).[2] Others argue the rules made the work of independent television production companies much more difficult because smaller companies could never afford the deficit financing required unless they received network assistance.[3]

Controversial from the very beginning, the fin-syn rule was relaxed slightly during the 1980s.[4] Following the severe changes in the TV landscape, such as the rise of the Fox network and cable television, fin-syn was abolished completely in 1993.[5]

It was the repeal of fin-syn that ultimately made broadcast networks UPN and The WB financially interesting for its highly vertically integrated parent media conglomerates Paramount Pictures (Viacom) and Time Warner, respectively.

On an average the number of shows that have been broadcast prime-time by the three main networks (CBS, NBC and ABC) per season has been between 63-75 shows since 1987-88 to 2001-02. In 1987-88 out of a total of 66 prime-time shows being broad cast there were no such shows where the network was either a producer or a co-producer. This number rose steadily to the point that in 1992-93 there were about 6 shows out of a total of 67 shows produced or co-produced by the network however as a result of the repeal of the fin-syn rules this figure jumped to 11 the next year whilst the total number of shows was barely 73. In 2001-02 this figure rose to 20 shows that were network produced - a change from zero percent, to nine-percent, to fifteen percent and from there to twenty percent - over two decades.[6]

Today, each of the four major networks has an affiliated syndication company:

Closely related to fin-syn, the Prime Time Access Rule seeks to strengthen local and independent producers by preventing affiliates from airing network programming during much of the early evening. This rule was eliminated August 30, 1996.

Deficit financing [edit]

Before the fin-syn rules, the networks attained greater control and less risk by forcing production companies to deficit finance their programs while also demanding a percentage of the syndication revenues.[citation needed] Deficit Financing is an arrangement in which the network pays the studio that makes a show a license fee in exchange for the right to air the show. The license fee is in exchange for the right to air an episode a few times (as a first- and re-run episode), and does not cover the complete cost of production. The studio remains in ownership of the show. Before the fin-syn rules were established, networks would put into practice "profit participation." Here, they gained greater control and avoided the risks by forcing the production companies to deficit finance their programs. Such practice led multiple production companies into financial hardships. Independent producers and those not signed with major working studios were hit the hardest because most of the profit revenue went to the networks. By the mid-1960s, Amanda D. Lotz explains that from profit participation, the networks gained as much as 91 percent of the programming revenue. That is when the government stepped in and got involved with the fin-syn rules in the 1970s.[7]

Deficit financing minimized the substantial risks and costs of developing programs for the networks while initially affording the studios considerable benefits as well. In successful cases, the studio receives a large return on its investment when it re-sells the show in a combination of syndication windows because the sales provide nearly pure profit: no additional work typically goes into the show and the network receives none of the payment.[citation needed] However, if the show is cancelled by the network before producing enough episodes to be syndicated, or if no syndication buyers want the show, the production company must absorb the difference between the cost of production and the original license fee, which can now amount to millions of dollars for each season.[8]

As of 2004, most reality television producers think that deficit-financing will never fly because the vast majority of reality production companies are too small to wait long enough for the big payoff. Instead of syndication, producers have been covering gaps between license fees and rising production costs by selling shows' formats to foreign territories and developing integrated marketing deals with advertisers.[9][10]

Changes in Financial Interest and Syndication Rules [edit]

The Fin Syn rules created two well defined periods that might be considered characteristics of the multi-channel transition. First; rise of independent studios that provided a competitive environment. Second; media companies like Disney, Viacom, News Corp. and Time Warner made purchases that combined studio and networks to create new kinds of corporate entities.

Throughout 1970's and mid 1990's the Fin-Syn rules broke a few network-era norms that created programming well before multi-channel transition adjustments. This also led to the creation of a fluid competitive environment between network and studios, however this did not long last.

During the year 1983 Fin-Syn had received threats to end these rules. During 1991 it was officially materialized, and in 1995 the FCC eliminated the rules. After the rules were eliminated networks began populating their schedules with new shows purchased from studios owned by the network.

Throughout all this the audience began to have more choices and control over entertainment options, and networks were pressured to offer fewer reruns to keep viewers' attention. This led to networks creating programming.[11]

References [edit]

  1. ^ Croteau, D. and Hoynes, W. (2006) The Business of Media: Corporate Media and the Public Interest. Thousand Oaks, CA: Pine Forge Press. p. 85
  2. ^ Lotz, Amanda D. (2007) The Television Will Be Revolutionized. New York, NY: New York University Press. p. 85-86
  4. ^ Croteau, D. and Hoynes. p. 91
  5. ^ Croteau, D. and Hoynes. p. 100-101
  6. ^ Scott, Allen J. (2005). On Hollywood : the place, the industry. Princeton, NJ: Princeton Univ. Press. p. 66. ISBN 978-0-691-11683-9. 
  7. ^ Lotz,Amanda D. (2007) "The Television Will Be Revolutionized". New York, NY: New York University Press. p. 85
  8. ^ Lotz, Amanda D. (2007) "The Television Will Be Revolutionized". New York, NY: New York University Press. p. 83-85
  9. ^ Lisotta, Christopher (2004)"Reality Gets Reworked for Prime". Television Week. Vol. 23. Issue 33 pg 40-41
  10. ^ Lotz, Amanda (2007). The Television Will Be Televised. NY: New York University Press. 
  11. ^ Lotz, Amanda D. (2007) "The Television Will Be Revolutionized". New York, NY: New York University Press. p. 86-90